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EUROMETAL – European Federation of Steel, Tube and Metal Distribution and Trading Federation domiciliated in Switzerland Federation Seat: Güterstrasse 78, CH-4010 Basel Post Box: 202b, rue de Hamm, L-1713 Luxembourg M: [email protected] F: +352 26 459 205 T: +352 621 146 296

OUTLOOK ON ECONOMIES & STEEL MARKETS

JUNE 2017

19.06 2017 © Eurometal.net 1

EUROMETAL OUTLOOK ON ECONOMIES AND STEEL AMRKETS JUNE 2017

2

ON ECONOMIES AND STEEL MARKETS, STATUS JUNE 2017

THIS OUTLOOK IS BASED ON CONTRIBUTIONS MADE DURING EUROMETAL WORLD STEEL

DISTRIBUTION & SSC SUMMIT, DÜSSELDORF, 10-11 MAY 2017 & EUROMETAL REGIONAL MEETING NORDICS, COPENHAGEN,08 JUNE 2017

BY:

PROF.DR.ROLAND DÖHRN, RWI INSTITUTE EDWIN BASSON, WORLDSTEEL ASSOCIATION

DR.HENRIK ADAM. TATA STEEL EUROPE JAN STORUP NIELSEN, NORDEA DENMARK

EUROMETAL OUTLOOK ON ECONOMIES AND STEEL MARKETS JUNE 2017

3

OUTLOOK ON WORLD ECONOMY AND EU ECONOMY


EUROPE IS LEADING THE WAY TO RECOVERY

EUROMETAL REGIONAL MEETING NORDICS; JAN STORUP NIELSEN, NORDEA DENMARK


ECONOMIC ENVIRONMENT

Roland Döhrn, RWI Institute EUROMETAL Summit 2017; May 10th, 2017 5

•  Upswing of the global economy continues to be weaker than earlier ones; but it is surprisingly stable

•  Regional differences:

–  Euro area: strong Q1 underpins that a solid upswing is on its way –  USA: Disappointing first quarter, but seemingly influenced by special

factors –  UK: GDP growth is moderate in the first quarter, in perspective of Brexit –  China: Lower rate, but enough room for stimulating policy actions


EURO AREA FORECAST

Roland Döhrn, RWI Institute EUROMETAL Summit 2017; May 10th, 2017

2016 2017 2018 Gross domestic product 1.8 1.8 1.7

Private consumption 2.0 1.6 1.5 Government consumption 1.8 1.2 1.2 Gross fixed capital formation 2.6 2.2 3.0

Domestic demand 1.9 1.7 1.7 Export 2.9 4.2 4.1 Imports 3.5 4.3 4.4

Net export (contr. to growth) -0.1 0.1 0.0 Inflation 0.2 1.6 1.5

Source: Leading German Economic Research Institutes, Joint Forecast Spring 2017


80

85

90

95

100

105

110

115

120

125

130

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

original seasonally adjusted

Roland Döhrn, RWI Institute 7 EUROMETAL Summit 2017; May 10th, 2017

WORLD TRADE IS BACK ON AN UPWARD TREND RWI-ISL Container Throughput Index; 2010 = 100


8

OUTLOOK ON WORLD STEEL MARKETS


GLOBAL OVERVIEW: A STEEL DEMAND WITH LOW GROWTH RATES

Steel demand, finished steel (SRO April 2017)

1 515.0 million tonnes, 1.0% growth



2016

2017 (forecasts)

2018 (forecasts)

9 Source: Edwin Basson, worldsteel


REGIONAL SUMMARY Steel demand, finished steel (SRO April 2017)

2016 2017 2018 16/15 17/16 18/17 2018 as % of 2007

World 1 515.0 1 535.2 1 548.5 1.0 1.3 0.9 126.5

European Union (28) 157.4 158.2 160.4 2.3 0.5 1.4 79.0

Other Europe 40.7 41.7 43.2 0.6 2.6 3.5 142.1

CIS 48.7 50.2 51.9 -4.1 3.2 3.4 92.1

NAFTA 132.2 135.2 138.5 -1.5 2.2 2.4 98.3

Central & South America 39.4 40.8 42.7 -13.6 3.5 4.7 103.4

Africa 37.9 38.4 40.0 -2.1 1.5 4.1 175.2

Middle East 53.1 54.8 56.8 -1.3 3.1 3.7 130.2

Asia & Oceania 1 005.6 1 016.0 1 015.0 2.3 1.0 -0.1 148.1

China 681.0 681.0 667.4 1.3 0.0 -2.0 159.5

Developing Asia excl. China

174.0 184.7 197.2 9.1 6.2 6.7 202.0

Developed Asia 143.7 143.5 143.5 -0.1 -0.2 0.0 89.1

million tonnes (Mt) %

Source: Edwin Basson, worldsteel 10


11

58.3%58.6%61.1%63.5%

73.9%58.3%58.6%61.1%63.5%

73.9%71.4%71.9%73.0%74.6%73.2%73.4%73.7%73.8%73.8%

41.7%41.4%38.9%36.5%26.1%41.7%41.4%38.9%36.5%26.1%28.6%28.1%27.0%25.4%26.8%26.6%26.3%26.2%26.2%

33.2%33.0%34.2%36.4%

48.0%33.2%33.0%34.2%36.4%

48.0%44.9%45.3%45.8%47.9%

46.0%44.8%45.0%44.4%43.1%

2000200120022003200420052006200720082009201020112012201320142015201620172018

REGIONAL SHARE IN WORLD STEEL DEMAND Steel demand, finished steel (SRO April 2017)


CHINA DEVELOPING ECONOMIES MATURE ECONOMIES

EUROMETAL OUTLOOK ON ECONOMIES AND STEEL AMRKETS JUNE 2017

SIGNIFICANT BOOST OF WORLD STEEL OUTPUT DURING FIRST 4 MONTHS 2017

WORLD STEEL OUTPUT JAN-APRIL 2017 / JAN-APRIL 2016

IN %

SOURCE: WORLDSTEEL, EUROFER; CHART BY EUROMETAL: UPDATED 19.06.17

WORLD STEEL APPARENT CONSUMPTION ESTIMATE 2017 / 2016 IN %

EU-28 + 4,5 % OTHER EUROPE + 13,0 % CIS - 0,3 % NAFTA + 5,1 % SOUTH AMERICA + 11,5 % AFRICA + 12,5 % MIDDLE EAST + 11,8 % CHINA + 4,6 % OTHER ASIA + 6,1 %

EU-28 + 1,3 % OTHER EUROPE + 2,6 % CIS + 3,2 % NAFTA + 2,2 % LATIN AMERICA + 3,5 % AFRICA + 1,5 % MIDDLE EAST + 3,1 % CHINA 0,0 % OTHER ASIA + 3,2 %

WORLD + 5,2 % WORLD + 1,3 %


GLOBAL STEEL DEMAND RE-ENTERS SLOW GROWTH PHASE

Source: worldsteel, IHS Global

Global steel demand expansion

13 Source: Edwin Basson,worldsteel


STEEL INTENSITY WILL COME BACK AGAIN TO A DECLINING TREND

405060708090

100110120130

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

1980=100

Steel intensity of GDP

Share of steel value added inGDP

10

Source: Edwin Basson, worldsteel,

Steel vital to ensure suitability Structural strength and lightness enabled to support all industry

revolutions Environmental benefits remain valuable

14


GLOBAL STEEL DEMAND: LONG RANGE FORECAST

•  Megatrends point to downside risks, especially with more aggressive implementation of circular economy impact

•  Global crude steel demand to reach an estimated 2055 MT in 2035

•  Current installed global capacities at 2390 million tonnes are sufficient

to meet steel demand until 2035

15

Global steel demand

Source: Edwin Basson, worldsteel, OECD (for capacity data)

2015 2020 2025 2035 Estimated global steel demand (Finished eq) 1501 1596 1699 1869 Estimated global steel demand (Crude steel eq) 1619 1733 1850 2055


OVERCAPACITY IS INCREASING AND COMPRESSING MARGINS; OVERCAPACITY IN EU IS HIGH BUT STABLE, IN CHINA IT HAS BEEN INCREASING

EUROMETAL May 2017

Global utilisation & overcapacity1

50%

60%

70%

80%

90%

100% 700

300

400

100

0

200

500

600

2013 2011 2014 2012 2010 2008 2009 2016 2015

Overcapacity, Mt per year (RHS)

Capacity utilisation, % (LHS)

1. Overcapacity is calculated using the effective capacity which is 92.5% of nominal stated crude steel capacity, i.e. taking into account maintenance downtime Source: World Steel Association, TSE Group Strategy

Overcapacity1 by region (Mt crude steel)

0

200

500

300

600

400

100

2009 2008 2006 2010 2007 2011 2012 2016 2014 2013 2015

China

EU

Other Asia

NAFTA

ROW

Figures are indicative

SOURCE: HENRIK ADAM, TATA STEEL EUROPE


17

OUTLOOK ON EU STEEL MARKETS


EUROPEAN UNION (28) Steel demand, finished steel (SRO April 2017) Mt %

2016 2017 2018 16/15 17/16 18/17 2018 as % of 2007

World 1 515.0 1 535.2 1 548.5 1.0 1.3 0.9 126.5

European Union (28) 157.4 158.2 160.4 2.3 0.5 1.4 79.0

France 13.0 13.2 13.4 2.1 1.8 1.5 80.9

Germany 40.3 40.7 40.8 2.6 0.9 0.4 95.5

Italy 24.2 23.6 24.1 -1.6 -2.7 2.1 67.0

Poland 13.1 13.3 13.7 4.3 1.5 3.0 113.9

Spain 12.6 12.8 13.0 0.1 1.5 2.0 53.1

United Kingdom 10.5 10.7 10.5 -1.6 1.8 -1.5 73.4



CHALLENGES FOR THE EUROPEAN STEEL SECTOR


•  Decline of specific steel use –  Changing structure of aggregate demand –  Technological change (e.g. electric car case)

•  Localisation of steel using industry –  Shifting in global demand patterns –  Protectionist measures

•  Overcapacities and the need of restructuring •  Steel imports from China are only a part of the problem


LOW INVESTMENT ACTIVITIES IN EU: STRUCTURAL BRAKE FOR STEEL DEMAND?

20

Gross Fixed Capital Formation in advanced economies 1991=100

50.0

100.0

150.0

200.0

250.0

300.0

9 1 9 3 9 5 9 7 9 9 0 1 0 3 0 5 0 7 0 9 1 1 1 3 1 5 1 7

USA

Euro area

Japan

Author‘s calculations. Dotted lines: pre 2008 trends

•  Investment activity in advanced economies still subdued

•  USA and Euro area considerably below before 2008 trends

•  Some recent improvement in the Euro area

•  What are the reasons? –  End of the innovation cycle? –  Change in production

technologies? (Soft- instead of hardware)

–  Sectoral change? (Growth driven by consumption)

SOURCE: ROLAND DÖHRN, RWI INSTITUTE


STEEL PRODUCTION IN THE EU FAR BELOW PRE-CRISIS TREND

1996 TO 2016; 1000 T PER MONTH, SEASONALLY ADJUSTED


8000 10000 12000 14000 16000 18000 20000 22000

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Jan-

14

Jan-

15

Jan-

16

Steel production Trend production Trend capacity Capacity reduction

Author‘s calculations; Trend 1996 – 2008; Trend capacity assume 82% capacity utilization on average; capacity reduction estimated based on OECD figures

outlook on economies & steel markets - the … · tata steel europe jan storup nielsen, nordea...

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